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The National Spot Exchange (NSEL) and its board not only violated multiple regulations but did not take action against repeated defaults which resulted in the current crisis at the bourse, according to an inspection by the Corporate Affairs Ministry.

The Registrar of Companies (RoC), Mumbai, has concluded that the crisis-ridden NSEL breached as many as 15 provisions of the Companies Act, including those related to corporate governance, sources said.

Sources said that the spot commodity exchange never declared any member as defaulter despite repeated instances of defaults, which is also one of the main reasons for the present crisis. Many of the defaulters were also allowed to trade and increase their exposure, they added.

NSEL, part of Jignesh Shah-led Financial Technologies Group, is grappling with a Rs 5,600 crore payment crisis after it suspended trade on July 31 on government direction. It has already seen major fallouts with rejig of boards at the exchange as well as at some other group companies.

Besides finding corporate governance failures, including lack of transparency, integrity and compliance, sources said the bourse did not have as many as nine committees. These panels are required under regulations.

Among others, the exchange did not set up vigilance, dispute resolution, trading, clearing and arbitration panels.

There have been discrepancies in the minutes of board meetings and it has been found that the board did not discuss the exchange's compliance with various rules such as those related to admission of new members, sources said.

Flagging various concerns, the inspection found that the exchange did not have a mechanism for verification of physical stock at the warehouses.

As per the findings, many NSEL directors, including Jignesh Shah and Joseph Massey, were holding common directorship in group companies of Financial Technologies and they cannot claim to be not aware about happenings at the exchange.

The inspection of books was ordered under Section 209 A of the Companies Act.

In the wake of the payment crisis, NSEL has come under the scanner of multiple agencies, including the Economic Offences Wing of the Mumbai Police. The wing has arrested five persons, including Anjani Sinha, former MD & CEO of NSEL, in connection with the case.

The EOW charged NSEL promoters, directors and defaulters with cheating, forgery, breach of trust and criminal conspiracy, among others.